Kroger (KR) stock has inched lower ahead of the department store chain’s fiscal Q2 results, which are set to be published before the market opens on Sept. 11. Consensus is for the retailer to post $1.05 a share of earnings (EPS) for the quarter, which would represent a 0.96% increase versus last year.
The earnings event comes as Kroger shares have fallen out of favor with investors, currently down nearly 25% versus their year-to-date high.
Where Options Data Suggests Kroger Stock Is Headed
Options traders seem to believe that a 0.96% year-over-year growth is far from sufficient to trigger a post-earnings rally in KR shares.
According to Barchart’s data, the put-to-call ratio on contracts expiring Sept. 18 sits at 1.94x currently, indicating a strong bearish skew (a reading above 1.00 is typically interpreted as bearish)
More importantly, the lower price on those options contracts sits at $53.54 as of writing, signaling potential for a more than 5% decline in Kroger through the end of next week.
Note that Barchart agrees with the derivatives market on KR, with its “100 SELL” opinion on the retailer indicating technical momentum suggests continued downside ahead.
KR Shares Are Not Inexpensive to Own
In its latest regulatory filing, Winton Group said it reduced its exposure to Kroger shares by 12.7% in the second quarter.
The investment management firm unloaded 39,123 shares in total, signaling waning institutional confidence in the retailer’s near-term earnings growth and valuation upside.
What’s also worth mentioning is that KR is currently trading at a forward price-to-earnings (P/E) multiple of about 11x, which makes it meaningfully more expensive to own than peer Albertsons at less than 8x.
That said, a healthy 2.75% dividend yield makes Kroger somewhat more attractive as a long-term holding.
How Wall Street Recommends Playing Kroger
Crucially, Wall Street analysts are not nearly as bearish on KR stock as the derivatives market.
According to Barchart, the consensus rating on Cincinnati-headquartered Kroger remains at “Moderate Buy,” with the mean price target of $71 indicating potential upside of roughly 25% from here.
